The Coronavirus Act 2020 is now in force.
This note sets out the key aspects of the Act which will be of vital importance to how both landlords and tenants interact and do business with each other during this period.
The Government has made it clear that it expects landlord and tenants to work together in the coming months and so it will be essential for parties to engage in order to try and resolve matters without recourse to the courts. Parties are being encouraged to keep in mind the expiry of the time limits which apply under the Act and forward plan to address any issues that may arise.
RESTRICTIONS ON FORFEITURE
- The measures are contained in section 82 of the Coronavirus Act (“Act”).
- Section 82 (1) of the Act provides that a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, during the relevant period. The Act does not stipulate if the arrears must be as a consequence of the current crisis.
- The relevant period begins on the day after the Act is passed and ends on 30 June 2020. The government has the power to amend the end date of the relevant period (and this can be done on more than one occasion).
- The new rules apply to business tenancies. For England and Wales this means any tenancy which either has security of tenure for the purposes of the Landlord and Tenant Act 1954 or has been contracted out of the provisions of the 1954 Act. This means that the Act will not apply to licences or other types of short term lettings (section 82 (12)).
- The Act relates to non-payment of rent (defined in section 82(12) of the Act as “any sum a tenant is liable to pay under any relevant business tenancy”) and so in addition to annual rent the terms of the lease should be checked to determine if other sums might be caught (e.g. insurance and service charge).
- The new legislation provides that no conduct by or on behalf of the landlord during the relevant period is to be regarded as waiving the right to forfeit for non-payment of rent. This ensures that parties can negotiate during this time without compromising their rights once the restriction on forfeiture is lifted.
- Tenants should be aware that landlords may be able to forfeit for the March quarter at the expiry of the relevant period and so it may be prudent to engage early and seek to reach an arrangement.
- The Act makes no reference to forfeiture being precluded for any other tenant breach of covenant (note: a section 146 notice would still need to be served before further action could be taken) or to insolvency proceedings.
PROTECTION FROM EVICTION
- The key changes to be aware of makes provision about notice periods in relation to possession proceedings in respect of certain residential tenancies.
- Notices under section 8 of the Housing Act 1988 (most commonly initiated for unpaid rent or some other breach of the tenancy) will typically require a minimum notice period of 3 months to be given (although there are some exceptions) during the relevant period (Schedule 29 (6)).
- Notices under section 21 of the Housing Act 1988 (commonly known as “no fault notices”) must specify a minimum notice period of 3 months (Schedule 29 (7)). (i.e. rather than the current 2 months).
- The relevant period begins on 26 March 2020 and ends on 30 September 2020.
- Landlords will want to ensure that they observe the new timescales and also that any notice given is in the correct form.
- As with business tenancies landlords will want to work closely with their tenants as regards any difficulties in meeting rental obligations as a result of the crisis so that proceedings can be avoided where possible and evidence of engagement shown to the court, where proceedings do subsequently become necessary.
- The Act also applies to a number of other types of residential tenancies (e.g. Rent Act 1977 etc.) and if further detail is required please do be in touch.
- The Act makes no mention of any provisions relating to notices served before 26 March 2020 but given the current circumstances (and limited court hearings) landlords should take advice before issuing proceedings or seeking to enforce any existing orders.
We are talking to our landlord and tenant clients all of the time providing counsel to guide them through this crisis. It is important to note that whilst forfeiture and evictions have been impacted by the legislation there are still a number of other remedies which exists. Landlords and tenants do need to be mindful of the obligations owed to each other irrespective of the provisions of the Act.